Good News: “Treasury Secretary Paulson Says Government Won’t Buy Troubled Assets” (On the Bailout, Part 25)

This is good news!

Treasury Secretary Henry Paulson said Wednesday that original plan to purchase distressed mortgage assets from Wall Street firms is not the best use of the $700 billion financial rescue package, and officials will now focus on direct capital injections into the struggling financial firms.


I always preferred something like
secured loans (along with other measures) or the Soros plan – USGOV is coming close to that.

Also, I had not thought of the all of the direct action in the commercial paper markets and that USGOV action has worked out to.

Buying up MBSs was always a lousy idea because “between the bad and fraudulent loan data and the flawed risk models, currently, complex mortgage securities can not be valued with any reasonable accuracy” thus the US Taxpayers were going to get screwed.

Update: HotAir covers the issue a bit differently but evenhandedly.

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10 Responses

  1. I hope Mr. Obama and his economic team can solve the crisis as soon as possible to save the future of the entire world, as we know, the crisis also have an impact to the world, including my country, Indonesia.

    at the past, all the export from my country was sent to USA, and now USA cannot buy and paid anymore 😦

    God bless all of us.

  2. I think the problem is going to continue for awhile.

    I really don’t know what an Obama administration. On one hand, it signals centrism and pragmatism. That’s a good sign.

    On the other hand, it has lots of leftists and anti-free traders. The ideas coming from there will hurt, not help.

    The trick is to calm down fincial markets (especially short-term and credit stuff) so the wheels of commerce and trade can continue.

    I hope Obama will embrace free-trade (no quotas, no tariffs, little regulatory interference), but I don’t really expect him to.

  3. In order to save the unions and the companies those unions are sucking blood off of, Obama would also have to raise tariffs, wouldn’t he, purple. He can’t just keep bailing them out like he wants, for eventually he is going to be accused of giving money to fat cats in return for political favors.

    Obama can perhaps nationalize the healthcare costs of the auto industry but with the additional taxes going on in the future it still won’t be competitive with what other nations like India or Japan can produce.

    As China and India industrializes more, the competition on American autos are going to go up, not down. In addition to taxes and union problems, they are either going to go out of business or they will need help from the government.

    If this means making a monopoly deal with Big Business, even if that includes the Oil Companies, then Obama will do it in return for power, in my view.

    After all, they never cared about fighting corruption, Big Businesses, or economic exploitation of the weak and poor in the first place. If the price of power means extracting tax money from Americans and giving it to companies, then that is just going to have to be the price that must be paid. Nothing is free, after all, not even the power of an Obama. It’s a good thing families other than Obama’s will have to pay all of the costs, though.

  4. Obama also can’t let these companies out source jobs, again, due to Union cconcerns.

    Btw, Obama is only going to acquire power after January the 20th. Until then, India will have to work with the Bush administration.

    Since Obama would like to outsource Afghanistan to other nations, India may be able to strike a deal and get Afghanistan but if it ever came between a choice of sacrificing the economy and lives in India or sacrificing the prestige and power of Obama, he will always prefer the former over the latter.

    It is the easiest and most convenient way. It is the cost to not having one government over one culture composed of one people.

  5. I think Obama/Dems will turn to Quotas/Tariffs to get the consumer to by more Detroit cars.

    I am working on a long post on the issue, and I don’t want to spoil it yet (plus I am working out my thoughts still).

    You are definitely right that competition is going to incresae (get better for cosumers).

    Detroit has been in a moderate decline my entire adult life.

    Throwing money at the same leaders to do more of the same things is going to save them. If facing going out of business isn’t enough of an incentive to get them to change, there is nothing under a bailout to make them do so.

    They will need to be put into Chapter 11. More to come….

  6. I don’t think short of a CHapter 11 they could even reform and remake their deals with the Unions. As it is, they would have to declare bankruptcy before they could renegotiate what previous CEOs have with the AUto Unions.

    Auto Unions also seem incredibly Leftist in their methods for long term prosperity. Their leaders know that making the companies less competitive here in America will result in less jobs for union workers and even huge layoffs if the companies goes kaput, but the union bosses keep doing it.

  7. It’s almost tribal in intent and style. Nothing matters so long as the tribe gets its little deals and favors out of the gig.

    The Sunnis ended up with Al Qaeda on their doorsteps when their tribalism rejected AMerica and the Iraqi elections (boycotted by the tribes).

    But the Unions in America will only cause the suffering of the union workers and nothing will change because unlike the tribes in AL ANbar, I don’t really think the union bosses will feel threatened enough to change their ways simply because of the minor economic woes of their members.

  8. You are correct: It is going to take Chapter 11 to do this right. I don’t think the Dems will want to do this. They will look for political cover instead of doing the right thing.

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